TORRANCE, Calif. – Farmer Bros. Co. yesterday reported financial results for the three and nine months ended March 31, 2014.
Third Quarter Fiscal 2014 Highlights:
- Net sales decreased 1.4% to $124.6 million in the third quarter;
- Gross margin improved to 38.4% in the third quarter compared to 37.7% in the third quarter of fiscal 2013; and
- Net income was $2.5 million, or $0.16 per diluted common share, compared to net loss of $1.3 million, or $0.08 per diluted common share.
“It was a challenging quarter,” said CEO Mike Keown.
“Extreme weather in the Midwest and Eastern markets kept the route trucks off the roads and customer demand was sluggish.” Keown went on to say, “We believe that customer issues in the aggregate limited our sales by about $4-5 million in the quarter, but we still expect the turnaround at Farmer Brothers to continue.”
Fiscal Three Month Results
Net sales in the third quarter of fiscal 2014 decreased $1.7 million, or 1.4%, to $124.6 million from $126.3 million in the third quarter of the prior fiscal year.
Net sales in the current period were impacted by the severe weather in the Midwestern and Eastern states and business-related disruptions experienced by some of our retail customers.
Gross profit in the third quarter of fiscal 2014 increased $0.2 million, or 0.4%, to $47.8 million, as compared to $47.6 million in the third quarter of the prior fiscal year.
Gross margin increased 70 basis points to 38.4% in the third quarter of fiscal 2014 from 37.7% in the third quarter of the prior fiscal year, primarily due to an 18% decrease in the average cost of green coffee purchased.
Operating expenses in the third quarter of fiscal 2014 increased to $49.9 million from $46.9 million in the third quarter of the prior fiscal year, reflecting an increase in selling expenses and the absence of $1.2 million in net gains on sales of assets recorded in the third quarter of the prior fiscal year, partially offset by a decrease in general and administrative expenses.
Total other income in the third quarter of fiscal 2014 was $4.8 million compared to an expense of $2.0 million in the third quarter of the prior fiscal year. Total other income in the third quarter of fiscal 2014 included $3.7 million in net gains on coffee-related derivatives as compared to $2.9 million in net losses on coffee-related derivatives in the comparable period of the prior fiscal year.
CFO, Mark Nelson said, “The green coffee commodity market experienced a sharp increase during our third fiscal quarter. Due to our coffee futures position, we saw the value of our derivatives portfolio increase significantly.”
Mr. Nelson continued, “We believe our hedging program has positioned us well to prepare for these sharply increased commodity input costs, and plan effectively for pricing actions in the future.”
Net income in the third quarter of fiscal 2014 was $2.5 million, or $0.16 per diluted common share, compared to net loss of $1.3 million, or $0.08 per diluted common share, in the third quarter of the prior fiscal year.
Adjusted EBITDA in the third quarter of fiscal 2014 increased to $11.1 million, or 8.9% of net sales, from $8.0 million, or 6.3% of net sales, in the third quarter of the prior fiscal year.
Adjusted EBITDA is a non-GAAP financial measure.
